Should You Buy the Dip in JinkoSolar Holding?

Based in China, JinkoSolar Holding Company Limited (JKS) is one of the largest and most innovative solar module manufacturers in the world. The company, together with its subsidiaries, engages in the design, development, production, and marketing of photovoltaic (PV) products in China and internationally. JKS had a vertically integrated solar product value chain, with an annual capacity of 20 GW for mono wafers, 11 GW for solar cells, and 25 GW for solar modules, as of June 30, 2020.

JKS joined the RE100, pledging to power 100% of operations with renewables by 2025. The stock gained 171.3% year-to-date. The presidential election casts uncertainty over JKS’ future, as both candidates have assumed polar opposite stances concerning clean energy. This combined with the hefty expenses has made the stock earn a “Neutral” rating in our proprietary rating system.  

Here is how our proprietary POWR Ratings system evaluates JKS:

Trade Grade: B

JKS is currently trading above its 50-day and 200-day moving averages of $47.98 and $26.01, respectively, indicating an uptrend. Moreover, JKS has gained 212.8% over the past three months, reflecting solid short-term bullishness.

JKS’ total revenues increased 22.2% year-over-year to $1.20 billion in the second quarter ended June 2020. Its total solar module shipments increased by 32% year-over-year. The quarterly EBITDA of $119 million increased by 86.3% year-over-year. The company’s EPS increased 405.4% from the year-ago value to $0.93.

Earlier this month, JKS signed a module supply agreement with juwi Hellas Renewable Energy Sources for the Kozani project. It is one of the largest utility-scale projects ever built in Europe to use bifacial modules.

Last month, JKS announced its intention to collaborate with Japan's largest oil refiner, ENEOS Corporation to build a gas station PV power plant. The company supplied 611MW of Tiger Bifacial Modules to Trung Nam Group in Vietnam in September.

However, the rising coronavirus cases in the United States and Europe could mar JKS’ growth to some extent.

Buy & Hold Grade: C

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, JKS’s positioning is pretty unfavorable. The stock is currently trading 47.8% below its 52-week high of $90.20, which it hit on October 21st.

The company’s net revenue grew at a CAGR of just 12% in the past three years, while EBITDA increased at a CAGR of 35.4% over the same period. Also, EPS increased at a CAGR of 23.2% in the past three years. However, net income decreased at a CAGR of 0.2% in the past three years.

While the demand for cleaner alternative energy has grown over the past years, high expenses remain a concern.

Peer Grade: C

JKS is currently ranked #7 out of 16 stocks in the Solar industry. Other popular stocks in the industry are Sunrun Inc. (RUN), Enphase Energy, Inc. (ENPH), and First Solar, Inc. (FSLR).

RUN and ENPH beat JKS by gaining 292.9% and 292.3% year-to-date, respectively, while FSLR returned 56.3% over this period.

Industry Rank: C

The Solar industry is ranked #52 out of the 123 StockNews.com industries. While solar power is likely to become an important source of energy for electricity production in a large part of the world in the future, it is very expensive at the moment.

Most industries are still in crosshairs regarding the decision to switch completely to clean energy. Also, the current elections play an important role in determining the fate of clean energy in the United States over the next four years. While Democratic candidate Biden has been pro-clean energy throughout his candidacy, President Trump has focused on improving the existing infrastructure for energy utility. Hence, the future of the US clean energy industry is dubious at the moment.

Overall POWR Rating: C (Neutral)

JKS is rated “Neutral” due to its bleak near-term outlook despite having positives such as strategic deals and steady growth over the years, as determined by the four components of its overall POWR Rating.

Bottom Line

JKS has the potential to soar in the upcoming months despite gaining more than 171% so far this year, based on its continued business growth and rising awareness regarding climate change. However, it remains to be seen if the company can come up with technological advancements fast to meet the growing demand and bring down the costs of its products.

JKS has an impressive earnings surprise history, with the company beating the consensus EPS estimates in three out of the trailing four quarters. The consensus revenue estimate of $1.3 billion for the quarter ended September 2020 indicates a 24.4% growth from the same period last year. Its EPS is expected to grow more than 10% next year. However, the outcome of the presidential election could be a deciding factor for the near-term direction of the stock. 

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JKS shares were trading at $57.81 per share on Friday afternoon, down $3.21 (-5.26%). Year-to-date, JKS has gained 157.05%, versus a 2.42% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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